Decision to make a price determination to apply to Robusto Investments Pty Ltd (trading as Compass Springs)

07 Jan 2020

Robusto Investments Pty Ltd (Robusto) is proposing to increase its drinking water prices to apply to approximately 170 customers at Mount Compass, approximately 50km south of Adelaide. The Essential Services Commission has been engaging with Robusto on its proposed prices, seeking evidence that its costs for providing drinking water services at Mount Compass are efficient. This information is necessary in order for the Commission to be satisfied that the proposal would comply with the pricing principles under the Commission’s price determination that applies to all minor and intermediate water industry retailers in South Australia.

The Commission has determined that, based on information provided by Robusto to date, there is insufficient evidence to demonstrate that its proposed prices are based on efficient costs. In particular, there is insufficient evidence to support:

the proposed return on assets, which should reflect the efficient financing cost of the drinking water assets, based on the prevailing investment risks, and

the amounts to be recovered as depreciation, which should reflect the efficient drinking water asset values and the remaining economic lives of those assets.

The Commission will therefore commence a transparent and consultative process to determine those two efficient costs, and to make a determination that will apply separately to Robusto, as distinct from the existing price determination that applies to minor and intermediate water retailers.

The determination process will commence from February 2020 and the Commission expects to issue a draft determination in April 2020 for public consultation, before making a final determination in July 2020. The Commission is planning to hold a public forum at Mount Compass during the six-week consultation period on the draft determination. Prior to that formal consultation period commencing, the Commission would welcome any views or evidence from stakeholders on the efficient costs of providing drinking water to customers at Mount Compass.

The determination of the efficient costs of Robusto’s drinking water services is likely to be different to the costs incurred by other water retailers in South Australia, including SA Water. The Commission understands that Robusto will continue to charge customers under existing pricing arrangements until the new price determination takes effect, however, customers should confirm the pricing arrangements that will apply to them in the interim period by contacting Robusto directly.